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Former associate testifies that ex-Ohio GOP Chair Borges paid to spy on bailout repeal effort
CINCINNATI — Former Ohio Republican Party Chairman Matt Borges paid $15,000 off the books in 2019, a witness testified Tuesday. It was in an attempt to gather inside information about the campaign to repeal a $1.3 billion utility subsidy that had just been passed by the legislature, a Borges associate said.
In addition, the chairman of the company that benefited most from the subsidy in an email referred to the scheme as a “black op” and said he was prepared “to do whatever it takes” to defeat the repeal effort, the witness, Juan Cespedes, said. Coincidentally, the chairman, John Kiani, started his career at Enron, a Houston Energy company that collapsed under a wave of unmet contracts and accounting scandals in 2001.
It was the 11th day in the federal court trial of Borges and former Ohio House Speaker Larry Householder, R-Glenford. Borges is accused of assisting Householder and others in a scheme to use $61 million from Akron-based FirstEnergy to make Householder speaker and pass the massive bailout.
The bulk of the bailout was intended to benefit money-losing nuclear and coal plants owned by FirstEnergy subsidiary FirstEnergy Solutions. It was going through bankruptcy proceedings and executives with the parent company and the subsidiary desperately wanted the bailout to complete the bankruptcy, spin off FirstEnergy Solutions and possibly sell the nuclear plants.
Gov. Mike DeWine signed the bailout the same day it passed in 2019, but a repeal effort started amid reports that it was “the worst energy bill of the 21st century.” Not only did it prop up 70-year-old coal plants under the guise of being a “Clean Air Program,” it also gutted the state’s renewable energy standards.
Borges was part of a team of lobbyists who worked to pass and protect the bailout, House Bill 6. And, because of his long experience in Ohio politics, he was asked to make use of some of his relationships in the effort, Cespedes, another member of the team, testified.
Cespedes was also charged with racketeering, but he pleaded guilty and is cooperating with prosecutors.
The off-the-books payment
One of the primary acts Borges is charged with has to do with a $15,000 payment he made during the repeal effort to Tyler Fehrman, who was helping manage the campaign to gather enough valid signatures to get the repeal on the ballot.
Inside information was valuable to the pro-H.B. 6 team because it enabled them to gauge the strategy and likelihood of success of the repeal effort.
Cespedes testified that he tried to keep the plan to recruit Fehrman from Kiani, the FirstEnergy Solutions chairman whose company financed a big portion of the fight against the repeal. Kiani was a hard-charging executive and Cespedes believed that once he learned of the spying effort, he would press the operatives relentlessly.
However, Cespedes said, Borges told Kiani about it, and it seems Cespedes’s worries were well founded.
In an Aug. 31, 2019 text, Kiani asked “what happened to the black ops?” in a reference that Cespedes said was to the spying effort. Then, in a Sept. 2, 2019 text, Cespedes told Borges that Kiani, “reiterated to do whatever it takes to get this information.”
It appears that Fehrman was paid, but it’s unclear what he was paid for.
In taped conversations played earlier in the trial, Borges discussed paying Fehrman, but he claimed to Fehrman that it was for work Fehrman might do some time in the future. But Borges made other statements that seemed to show that he knew the two were doing something wrong.
“It would be bad for both of us if the story came out,” he told Fehrman in a recording that Fehrman made with the help of the FBI. “But it would be worse for you.”
On Tuesday, Cespedes testified that he roughed out a budget at the time of the repeal campaign. He made an entry in it to pay $25,000 to an “employee.” Cespedes said the money was intended for Fehrman.
Asked why he used “employee” to label the entry, Cespedes said, “I wasn’t going to write ‘bribe.’ I wasn’t going to write anything nefarious.”
Prosecutors displayed a photograph of what they said was a contemporaneous budget that Borges roughed out in a notebook that Cespedes had photographed. Cespedes testified that when he asked Borges why a payment to Fehrman wasn’t in it, Borges “simply said it wasn’t something he wanted to write down.”
Cespedes testified that Fehrman later went quiet on Borges and Cespedes assumed that their deal had fallen through. But after the repeal campaign had failed, an accounting showed that the $15,000 had been paid, Cespedes said.
When he asked Borges about it, “He said, ‘I just wanted to keep him quiet,'” Cespedes testified.
Earlier in the HB 6 fight, Borges and Cespedes were struck by Kiani’s connections to Enron, which ceased to exist after one of the biggest corporate scandals to that point in American history.
“The shocking thing last night was learning that Kiani came from Enron,” Borges said in a text.
Kiani went from there to work as a hedge fund manager and then he made his way onto the FirstEnergy Services board as an activist investor. Cespedes testified that a Kiani aide told him that Kiani would make $100 million from the sale of FirstEnergy Solutions’ nuclear plants.
Regardless of whether that’s accurate, Kiani clearly was willing to spend lots of corporate money to win subsidies for them. To fund a statewide, eight-week media campaign for the bailout, bankrupt FirstEnergy Solutions approved a $15 million budget, Cespedes testified.
That amount would grow after the bill passed and the repeal fight got underway.
Kiani continues to be executive chairman of Energy Harbor, the new name for FirstEnergy Solutions after it emerged from bankruptcy. His company bio credits him with “the successful operational and financial turnaround of Energy Harbor into a leading, carbon free power infrastructure and energy supply company.”
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